Prop 19 takes effect on February 16, 2021, which doesn’t give you much time to take advantage of current law (Prop 13) if it’s the better move for you and your family.
If you haven’t read our overview of Prop 19, we recommend doing that first here.
Now, here are the ways you can get ahead of Prop 19 and preserve low property taxes for your children. WARNING: we don’t recommend taking any of these steps without consulting with your legal and tax advisors; this is one of those “don’t try this at home” situations.
Outright Gift to Children Now. This solution is kind of like using a chef’s knife to perform surgery: it’ll get the job done, but it’ll probably leave a mess. You can accomplish this strategy by deeding your property to your children now (and recording the deed with the required property tax forms). As long as the process is complete by February 15, 2021, you will have preserved your property tax basis for your children. And this works for non-primary residence property too (rental property, commercial property, etc.), subject to Prop 13’s $1 million dollar limit on other property.
Irrevocable Trust for Children Now. Our recommended solution is an irrevocable trust. This is your scalpel: it’s the appropriate instrument to use and if it’s done properly, it won’t create any unexpected damage. You can accomplish this strategy by designing and implementing a trust (with your professionals) and then deeding your property into that trust (and recording the deed with the required property tax forms). As long as the process is complete by February 15, 2021, you will have preserved your property tax basis for your children. And this works for non-primary residence property too (rental property, commercial property, etc.), subject to Prop 13’s $1 million dollar limit on other property.
However you slice it, the key is to start the conversation with your professionals now. In speaking with numerous clients over the past weeks about this, it turns out that many of them will actually be ok under Prop 19, or they’re willing to sacrifice higher property taxes for benefits in other areas of their planning. Other clients will definitely be impacted, so we’re implementing strategies swiftly to use Prop 13 while we still can.
But you won’t know unless you talk to a qualified professional, so contact us today to start the conversation.